This calculator helps you determine the maximum loan amount you can borrow given a specific target monthly payment, an annual interest rate, and the desired loan term. This is a crucial tool for financial planning, enabling you to understand your borrowing capacity before committing to a loan, whether it's for a mortgage, car loan, or personal financing.
How it Works: The Math Behind the Calculation
The calculator uses a standard loan amortization formula, rearranged to solve for the Principal (P), which is the maximum loan amount. The formula is derived from the present value of an ordinary annuity.
Here are the variables:
M: Monthly Payment (the target payment you input).
Calculate P = M * [result from step 4]: P = 800 * 158.635 ≈ $126,908.00
So, with a target monthly payment of $800, a 6.5% annual interest rate, and a 30-year loan term, the maximum loan amount you could afford is approximately $126,908.00.
When to Use This Calculator
Mortgage Pre-qualification: Estimate how much house you can afford based on your desired monthly mortgage payment.
Car Loans: Determine the maximum vehicle price you can consider given your budget for monthly car payments.
Personal Loans: Understand the principal amount you can borrow for personal expenses within your repayment comfort zone.
Financial Planning: Budgeting and setting realistic financial goals by knowing your borrowing limits.
By understanding your maximum loan amount, you can approach lenders with more confidence and make informed decisions that align with your financial well-being.
function calculateLoanAmount() {
var monthlyPayment = parseFloat(document.getElementById("monthlyPayment").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
var loanAmountResultElement = document.getElementById("loanAmountResult");
// Input validation
if (isNaN(monthlyPayment) || monthlyPayment <= 0) {
alert("Please enter a valid target monthly payment greater than zero.");
resultDiv.style.display = "none";
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate (0% or greater).");
resultDiv.style.display = "none";
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter a valid loan term in years (greater than zero).");
resultDiv.style.display = "none";
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var numberOfPayments = loanTermYears * 12;
var loanAmount = 0;
// Handle the edge case where interest rate is 0%
if (monthlyInterestRate === 0) {
loanAmount = monthlyPayment * numberOfPayments;
} else {
// Standard formula for calculating loan principal
loanAmount = monthlyPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
}
// Format the result to two decimal places and add currency symbol
var formattedLoanAmount = "$" + loanAmount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
loanAmountResultElement.textContent = formattedLoanAmount;
resultDiv.style.display = "block";
}